With a real rate of growth of 2.7%, the world economy failed to fulfill our hopes for a more noticeable acceleration of economic expansion. As was the case in the two previous years, growth was also once again lower than the long-term trend. (See graphic B.05) This development was mainly due to ongoing weak demand in the European Monetary Union and the difficult economic situation in several important emerging markets. Prices on the global financial markets fluctuated greatly throughout the year. This was also the case with raw material prices, which declined noticeably in the second half of the year, especially for crude oil.
The economies of the industrialized countries were somewhat more dynamic than in the prior year. Taken together, the real gross domestic product (GDP) of these countries rose by approximately 1.7%. A particularly pleasing development during the year under review was the dynamic economic growth recorded in the United States, whose economy grew by significantly more than 3% in the period following a weather-related decline in the first quarter. If not for the negative basis effect from the first quarter, overall economic growth in the United States in full-year 2014 would have been higher than the recorded figure of approximately 2.5%. Economic growth in Japan was impacted during the year under review by the significant increase in the country’s value-added tax at the beginning of the second quarter, which caused consumers to bring purchases forward before the tax hike. All in all, the Japanese economy grew by less than a half percent in 2014.
Whereas growth in English-speaking countries was quite robust (the British economy also experienced dynamic growth of 2.6%), the European Monetary Union lagged well behind in comparison. Although the euro zone was able to recover from the recession of the prior year, economic growth still failed to reach 1% there in 2014. This was largely due to the sluggishness of the euro zone’s larger economies such as France and Italy, as well as the fact that the German economy was barely able to generate any momentum in the second half of the year. By contrast, countries plagued by recession in recent years, such as Spain, Ireland and Portugal, developed favorably in the year under review. The European Central Bank intensified its expansionary monetary policies throughout the year in response to ongoing deflation concerns and the low amount of lending in the euro zone.
The overall pace of economic growth in the emerging markets slowed once again in 2014. Growth in these markets amounted to approximately 4% in an environment marked by rising inflation and in some cases dramatic currency devaluations. Whereas the slowdown in China associated with economic restructuring measures led to growth of 7.4%, which was in line with expectations, developments in countries such as Brazil, Argentina, South Africa and Russia were particularly disappointing. In the case of Russia, the conflict with Ukraine and the associated economic sanctions as well as the drastic fall in the oil price put an additional strain on the economy.
In this global economic environment, exchange rates were volatile, in some cases very much so. For example, the euro fluctuated against the US dollar over the year in a range from $1.21 to $1.40. At the end of 2014, the euro stood at $1.21, which was nearly 12% lower than the exchange rate at the beginning of the year. The fluctuation of the Japanese yen against the euro was once again very pronounced within a corridor of ¥134 to ¥150. By the end of 2014, the euro was close to at the level of the previous year. The euro closed the year with a loss of approximately 7% against the British pound, with rather less volatility between the two currencies during 2014. While the euro gained 55% against the Russian ruble in 2014, it was slightly weaker (-1%) against the Brazilian real at the end of 2014, with high volatility during the year.